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Capistrano Taxpayers Association Files Legal Action Against City Over Water Rates

By John Perry

After several offers to discuss remedies were ignored by the City, attorneys representing the Capistrano Taxpayers Association (CTA)* filed a lawsuit against the City on August 29. According to attorney Ben Benumof of Wilcox & Benumof in San Clemente, the legal action, called a “writ of mandate”, asks the court for several findings.

Tiered Water Rates
The first is to find the tiered water rate schedule imposed by the City Council to be unconstitutional under the provisions of Proposition 218, which limits the fees Cities may impose. Under Proposition 218, the City must show it has based all fees for property-related services on the actual cost of the service. The CTA believes the tiered rate structure for Tiers 2 through 4 punish the water users for failure to meet City-imposed water allocations. The writ of mandate asks the court to invalidate the tiered structure unless the City can prove the structure is actually based on cost of service.

The Phantom Bond
Under the complaint, the CTA also charges that the City increased water fees to provide funding for a planned $18 million municipal bond sale. Water rates were increased in February 2010, by $1.3 million per year for 30 years, to repay the planned bonds. However, the City was unable to sell the bonds because of their lack of reserves so the bond sale was cancelled. But the City kept the $1.3 million per year in the rate structure to be used for other utility costs. Thus, ratepayers have been charged $1.3 million per year to pay for a bond that doesn’t exist (hence the term “The Phantom Bond”).

The CTA believes this action by the City violates the provisions of Proposition 218 because the City did not sell the bonds and did not incur the costs of debt repayment but instead used and is still using the money to fund other utility costs. The CTA asks the court to set aside the money in an escrow account to fund the bond whenever it is issued.

The final cause of action asks the court to compel the City to buy water for City residents from the least expensive available source. To do otherwise is an obvious waste of taxpayer money.

Since 2004, the City has operated the Ground Water Recover Facility (GWRP) that pumps water from underground and filters it to remove all of the contamination. The resulting purified water furnishes a portion of the City’s drinking water supply. The City also purchases drinking water from the Metropolitan Water District (MWD) to supplement the water supply. The MWD gets their water from Northern California and from the Colorado River. It costs the City about $1400 per acre foot to produce its own drinking water (this amount varies; in August the cost per acre foot was as high as $2400) while the MWD charges about $860 per acre foot for its water. The City council maintains that it must have a “diverse” water supply to protect the public during an emergency, so it continues to spend taxpayer monies to maintain and expand this redundant source of water. The MWD has supplied water to California Cities for over 100 years in times of war, earthquakes, and other natural emergencies. The CTA believes the City is wasting taxpayer money and risking financial disaster by generating multi-million dollar deficits while raising water rates by over 105% since the GWRP has been in operation.

Please visit the CTA website at www.capotax.org to read the full copy of the lawsuit and other pertinent information. The CTA requests that residents join the effort to bring lower water rates to the City by donating to the CTA legal fund to help defray the cost of litigation. With your help and support, our goal is to force the City to be fiscally responsible in the expenditure of our tax dollars. Please mail donations to:

CTA

P.O. Box 1452

San Juan Capistrano, CA 92693-1452

* The CTA is a local 501(c)4 nonprofit public interest corporation formed in response to community concerns about issues such as the rising cost of water, water rate increases, the increase of debt obligations, and various other City-imposed fee increases passed by the City council.

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